The first segment of this week’s spotlight is focused squarely on Governor-elect Dr. Ricardo “Ricky” Rosselló, a 37 year-old stem cell scientist and son of former Governor Pedro Rosselló. We cover his newly appointed transition team, and what to expect on the fiscal and economic fronts from the incoming administration:
Rosselló appoints transition team
The Governor-elect has appointed the members of his transition team, including four women and six men. Most of the appointees are party loyalists and/or worked for Roselló’s campaign. The Executive Director of the Transition team will be New Progressive Party Secretary General and longtime pro-statehood activist William Villafañe.
The other eight members of the team include former Consumer Affairs Department Secretary Luis Gerardo Rivera Marín, attorneys Itza García and María Palou, Jeanelle Alemar Escabí, engineer Manuel Laboy, former Labor Secretary Aura González, the director of the campaign’s social media operation and attorney Alfonso Orona Amilivia, and attorney Ramón Rosario.
Rosselló also appointed a “Technical Group,” tasked with analyzing the financial information provided to the transition team by the outgoing García Padilla administration.
Members of the Technical Group include some of the members of the Transition Team, as well as former Housing and Economic Development and Commerce Secretary Carlos Vivoni, former Economic Development and Commerce Department Deputy Secretary Edward Calvesbert, and José Izquierdo.
A key member of the incoming Governor’s team will be his campaign manager, Elías Sánchez.
Tax and Debt Policy Outlook
Rosselló campaigned heavily on cutting the budget, although it is unknown which precise expenditures he will target. During his meeting with García Padilla, the incoming Governor made clear that his views differ from those in García Padilla’s 5-year fiscal plan. In particular, Rosselló’s plan does not assume the expiration of $3 billion in additional federal healthcare funding from the Affordable Care Act (i.e. “Obamacare”), which is anticipated to run out in 2017, two years earlier than expected. The Governor-elect’s plan also did not assume the expiration of Law 154, which imposes a 4% excise tax on foreign manufacturing companies and which receives a credit from the IRS; the IRS has said that it will honor this credit pending review.
Rosselló also campaigned on fully paying Puerto Rico’s $73 billion public debt. After facing criticism that he was the “bondholders’ candidate” because he was not in favor of restructuring the debt, Rosselló said he would consider haircuts on principle as part of any renegotiations.
One of Roselló’s top priorities is making Puerto Rico the 51st state of the U.S. To that end, Rosselló conditioned his support for the Private Sector Coalition’s initiative to create Section 245A of the federal Internal Revenue Code—which would reduce federal taxes on repatriated profits of US manufacturing companies in Puerto Rico by 85%– on a transition towards statehood.
Statehood in general faces an uphill climb in the U.S. Congress and with the incoming Trump administration. Despite successive GOP platforms pledging to support statehood if chosen by the Puerto Rican people, every statehood-related bill in the U.S. Congress has been opposed by an overwhelming majority of Republicans.
Oversight Board to meet in Puerto Rico this Friday
The Fiscal Oversight Board for Puerto Rico will meet in Puerto Rico for the first time this Friday. The meeting will focus on a review of financial transactions of the entities under the Board’s jurisdiction, as well as a review of the Aqueducts and Sewer Authority’s (PRASA) financial situation.
Unlike the Board’s previous two meetings, both held in New York City, this meeting will be closed to the public. The meeting will be held at 7:30am EST at a conference room in El Conquistador Hotel in Fajardo, PR, and livestreamed via http://www.juntasupervisión.pr.gov.
Energy Commission under fire, as deadline for new rate structure approaches
The Rosselló administration has fired its first shot at the recently created Energy Regulatory Commission, with Rosselló campaign manager Elías Sánchez stating that the need for an Energy Commission will be reviewed by the incoming administration. The Commission regulates the rate structures and other key financial aspects of the Electric Power Authority (PREPA). The deadline to approve a newly proposed rate structure is January 11, 2017, and the Commission is expected to hold hearings on the matter from November 29 to December 15, 2016.
Federal judge rules in favor of Commonwealth in 2nd bondholder lawsuit
U.S. District Judge Francisco Besosa handed Governor García Padilla a second victory by denying a consolidated petition by a group of creditors to lift the stay on debt collections included in the PROMESA federal law. Besosa also warned the government to speed up negotiations with bondholders, as the stay expires in mid-February. The consolidated suit was brought by Brigade Capital against the GDB, along with bond insurers National Public Finance Guarantee, as well as a group of Puerto Rican creditors. The decision also gave limited relief to US Bank & Trust, which is the trustee for University of Puerto Rico (UPR) debt.